The impact of delayed payments on CIBIL score

HSBC Bank is a bank I try to avoid as much as possible because their tech systems are buggy, and their stance arrogant. I came to this conclusion after their systems wrongly flagged my accounts twice, once in 2021 and again a different account in 2022.

I had closed an HSBC credit card in 2006. HSBC Bank lost track of some details about this card and started reporting this card as delinquent in 2021. For 15 years, they had forgotten about this card. In 2020, they even issued me a new credit card. But in 2021, they randomly decided that I hadn’t been paying my credit card bill for 15 years. This was purely because of HSBC Bank’s incompetence in record-keeping, but they pushed the blame onto me because they could. Incompetent, dishonest, and immoral: quite a combination.

I was naive back then, and I decided to pay the bank their ransom to mark this card as paid. I really should have complained to the RBI and shouldn’t have paid them a paisa. But I was ignorant, and just paid my way out of this headache.

But this so-called “delinquency” has been in my credit report ever since, and naturally, it was pulling my credit score down.

Back in September 2023, 2 years after I paid HSBC the ransom, my CIBIL credit score went from around 730 to around 760. A jump of 30 points right around the time when this “delinquency” was just over 2 years old. Now, in September 2024, the score has gone up by another 30 points since the “delinquency” is now more than 3 years old.

In fact, the report now shows that I have been paying my dues on time 100% of the time.

Why am I writing about this?

I am writing this post because I can now see that CIBIL only looks at repayment history of the past 3 years. It’s also nice to finally get a score that I deserve. I am amused, and I am sharing it with others. That’s pretty much it.

If your credit score is affected by something negative like this, be hopeful that eventually the negative remarks will stop impacting your score. But be aware that credit reporting agencies can change the rules at any time. They may change 3 years to 5 years (or 2 years) if that suits them. The score bump may not stay at 30 points per year—it may increase or decrease.

Credit reporting is a practice by lenders for lenders. They don’t care much about borrowers. I always recommend people to ignore credit scores and focus on what’s in their control. (I regularly review my credit report to see if there are unexpected entries there. But I don’t care too much about the score per se. Worrying about things not in our control is unproductive.)